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IN THE HIGH COURT AT CALCUTTA
KRISHNA RAO, J.
Kunal Finance & Credit Private Limited – Appellant
Versus
Vinayak Mica Export Company & Ors. – Respondents
IA No: GA 3 of 2021 In CS 4 of 2020
Decided on : 14-07-2023
SUMMARY JUDGMENT - LOAN RECOVERY - SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881 - DEFENCE OF NOVATION OF LOAN AGREEMENT - COURT ANALYSIS AND CONCLUSION - NO SUBSTANTIAL DEFENCE - SUMMARY JUDGMENT GRANTED SUBJECT TO DEPOSIT OF CLAIM AMOUNT.
Fact of the Case:
Plaintiff, a non-banking financial company, filed a summary judgment application for recovery of a loan of Rs. 50 lakhs granted to the defendants, a partnership firm and its partners. The loan was initially for 120 days with a provision for renewal and interest rate of 17% per annum, later revised to 18% per annum. The defendants paid interest till September 2013 and issued a confirmation of account statement acknowledging the loan and interest. Despite several requests, the defendants failed to repay the loan. A cheque issued by the defendants for part payment was dishonored. The plaintiff initiated proceedings under Section 138 of the Negotiable Instruments Act, 1881.
Finding of the Court:
The court found that the defendants admitted to the loan and interest but claimed that the loan agreement was novated by a subsequent agreement to sell certain properties to the plaintiff. The defendants alleged that the plaintiff failed to pay the balance consideration for the sale and forfeited the earnest money paid by them. The court also noted that the defendants claimed that the cheque relied upon by the plaintiff was given as security in 2013 but the plaintiff inserted the date of 2017 without their consent.
Issues: 1. Whether the defence set up by the defendants is illusory or sham? 2. Whether the plaintiff is entitled to summary judgment?
Ratio Decidendi: The court referred to the principles laid down in Smt. Kiranmayi Dasi (AIR 1949 Cal 479) and subsequent Supreme Court decisions regarding summary judgments. It held that if the defendant has no substantial defence or raises no genuine triable issues, the court may refuse leave to defend and grant summary judgment. The court also noted that summary judgments should not be granted where there is a serious conflict as to the matter of fact or difficulty on issues of law.
Final Decision: The court found that the defence set up by the defendants was not substantial and did not raise any genuine triable issues. It granted summary judgment in favor of the plaintiff subject to the condition that the defendants deposit the claim amount with the Registrar of the Court. The Registrar was directed to invest the amount in an interest-bearing fixed deposit.
JUDGMENT :
Krishna Rao, J.
1. The plaintiff has filed the present application being G.A No. 3 of 2021 for summary Judgment for a sum of Rs. 1,05,81,972/-against the defendants.
2. The plaintiff contended that the plaintiff is a non-banking financial company carrying on business of lending money. The plaintiff is duly authorised by the Reserve Bank of India for the said business. The defendant No.1 is a partnership firm and the defendant Nos. 2 and 3 are the partners of defendant No.1.
3. The defendants obtained loan of Rs. 50,00,000/-from the plaintiff on April 4, 2011 with interest at the rate of 17% per annum. The said loan was initially for a period of 120 days with the provision for renewal by mutual agreement subject to the Defendants making payment of interest accrued thereon from time to time. The plaintiff has transferred an amount of Rs.50 lakhs by RTGS on April 4, 2011 and the defendants have acknowledged the same through a receipt confirming the interest at the rate of 17% per annum. Subsequently after renegotiation the interest rate was enhanced from 17% to 18% p.a. with effect from December 1, 2011 and the defendants have started paying the interest at the rate of 18% p.a. thereon.
4. The loan was renewed from time to time subject to the condition that the defendants shall continue to make payments of interest quarterly to the plaintiff. Till September 30, 2013, the defendants have paid the interest on the said loan and the defendants have also deposited Tax Deducted at Source (TDS) to the credit of the plaintiff on the interest payable to the plaintiff. Since October 1, 2013, the defendants failed to make payment of interest. The defendants requested for extension of time for payment of interest as well as the principal amount. On April 1, 2014 the defendants have issued a confirmation of account statement to the plaintiff.
5. In spite of several requests made by the plaintiff to the defendants to repay the loan amount along with interest the defendants has failed to do so, accordingly, the plaintiff has made a complaint to the Officer in charge of Burrabazar Police Station, Kolkata, against the defendants on November 29, 2016. When the defendants came to know about the complaint, the defendants have approached the plaintiff and requested the plaintiff to not to pursue with the complaint and have issued a cheque being No. 298282 dated January 16, 2017 drawn on Canara Bank, Chowringhee Branch amounting to Rs. 50 lakhs as part payment and also undertook that they will pay the balance dues within January 31, 2017. The cheque issued by the defendants was dishonoured on January 19, 2017 with the remarks “Insufficient Funds”. After dishonour of cheque, the plaintiff had initiated a proceeding against the defendant under Section 138 of the Negotiable Instruments Act, 1881.
6. Mr. Rupak Ghosh, learned Advocate representing the plaintiff submits that in accordance to the money receipt executed by the defendants dated April 4, 2011, it is admitted that the defendants have received Rs.50 lakhs through RTGS as loan and they will return the said amount with interest at the rate of 17% per annum and subsequently the interest rate was revised at 18% per annum. Till September 30, 2013, the defendants have paid the said interest which admits from the TDS certificate and it further admits from the confirmation of account issued by the defendants where in it was confirmed about the loan amount and the interest thereto.
7. Mr. Ghosh further submitted that the defendants have issued a cheque of Rs.50 lakhs dated January 16, 2017 which was subsequently dishonoured. Mr. Ghosh further submits that after the dishonour of the cheque, the plaintiff had issued a notice which was duly received by the defendants but no reply was sent. Mr. Ghosh relied upon the judgment reported in (2019) 4 SCC 197 (Bir Singh vs. Mukesh Kumar) and submits that even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, w
A defendant is entitled to unconditional leave to defend if they satisfy the court that they have a substantial defence likely to succeed, or if they raise triable issues indicating a fair or reasona....
The court established that a defendant must present a substantial defense to avoid summary judgment; mere assertions without evidence do not suffice.
Certified copies are admissible in summary suits, and defenses that do not raise triable issues can be dismissed without leave to defend.
A cause of action is established when the plaintiff proves necessary facts for relief, as demonstrated by the acknowledgment of a loan and dishonor of a cheque.
The main legal point established in the judgment is the consequences of making false statements on oath and the distinct and new liability arising under the Negotiable Instruments Act when payment is....
A defendant in a summary suit is entitled to leave to defend if they raise plausible triable issues, even if the defense is not strong.
Point of Law - Order is contrary to the settled principles of law and once a party has given the cheque for setting right the accounts, then in that case, all such contentions which are not raised at....
The main legal point established in the judgment is that admissions by the parties and the authenticity of documents play a crucial role in determining liability for loan repayment.
The plaintiff's claim based on the receipt and cheque fell within the ambit of Order XXXVII CPC, and the defendant's defense of forfeiture was rejected due to lack of evidence.
The judgment established the principles of liquidated damages and reasonable compensation under the Indian Contract Act, 1872, and emphasized the importance of genuine triable issues in determining t....
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